02.27.2007 - Tuesday Open Thread
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Three articles on the WSJ (two from today, one from yesterday) on the sub-prime mortgage market. You'll need to be a WSJ subscriber.
Subprime Game's Reckoning Day
Freddie Mac to Tighten Subprime Rules
Home Lenders Cut the Flow Of Risky Loans
This market is getting fitted for a 3/4" Manila rope necklace.
Execution day is approaching. The REIC is protesting outside the prison walls.
The governor is on vacation.
A Columbian Necktie is forthcoming.
(this comment is not intended to offend any nationality or race)
It's the perfect storm!
I have two bets with a co-worker this year.
1. The S&P 500 index will be lower on Jan 1 2008 than it was Jan 1 2007.
2. There will be a YOY decline in housing from March 2007 to March 2008.
So far I like my odds!
"But he cautioned that the warm weather in December boosted home closing in January, the activity that is tracked in the Realtors report. He said there could be a bit of a payback in coming months"
Out of David Lereahs mouth? My eyes have caught fire just by seeing an ounce of truth eminating from him. OH THE HUMANITY!!!!!
A reader that was unable to log in emailed me the following:
Zillow provides evidence of Washington bubble:
"Zillow had estimated that a four-bedroom, 7,600-square-foot home in Fall
City, Wash., was valued at $661,756. The home, built last year, sold in
early January for $2.7 million."
So according to the article, Zillow is within 25% of the "correct" value for 89% of estimates...and the Real Estate Professionals (tm) have the nerve to sneer?
I'd love to see how accurate 1,000 Real Estate Professionals (tm) are at doing the same estimates. I bet you'd see a hell of a lot more error than you do with Zillow.
(Of course, I'm completely ignoring the fact that a home is not "worth" $X just because one bozo paid $X for it during the last sale. If we consider that a significant number of sales are made to speculative lunatics, it may actually be the case that Zillow is more accurate than the Professionals (tm), given that it is not so easily swayed by bullshit....)
Just in case anybody missed this, Dow plunges 500 then gains some back
Did anyone see this article in the NYTimes: When Renters Reach the Breaking Point ?
I realize that NYC is expensive, but are these people delusional? Is this a historical abberation? Is it really worth $4,000 a month for a rat-infested apartment?
After reading this article, I became a little ill, thinking about the number of people who believe Seattle is "New York Alki"....
Heavens to Betsey who opened the gates of hell today? At lunch today the subject of the market plunge was kicked around…..also one co-worker said yes subprime is a mess and housing was overpriced everywhere………and then he added “but Seattle can’t go down” I just stared at him - I mean really I wanted to break out and laugh, I could not believe I finally heard that comment in real life.
Yes, the DJIA got tossed around like a rag doll today, but the good news was that nobody in Seattle lost any money.
I think it is because we are on a different currency and are immune from global and national economic fallout.
In case anyone was wondering, I left the CRASH-CON status at CRASH-CON 3. Stay tuned for further developments.
We now return you to your "What, me worry?" lifestyle already in progress.
Asian futures are pointing to this continuing.
Dow 12K, it's been nice knowing ya.
If this is the real thing, we are not going to have a bottom until we are in the 7K range, or worse.
I waited over 900 days for today, and I'm thinking my long wait for all the "creative class" types to finally shut their yaps is not long off.
Man I wish that I had brought some popcorn to the office today. Time to sit back and watch!
I was going to post earlier (before the market had closed; I held my tongue) that today felt a LOT like March 10-15, 2000, when the NASDAQ fell from over 5000 to ~4600, thus marking the beginning of the dot-com collapse.
I remember that week distinctly: I was on a business trip, and so I did the whole triple-S routine every morning to the sound of the CNBC Money Honey telling me that There Was No Reason to Panic (tm), and that Everything Would Be OK (tm). After all, Money Honey said, the daily changes were small! Only a few percent!
Ha ha ha.
I'm giddy....I can hardly wait for tomorrow. Keep tanking, China! Turtle soup for everyone!
BURN BABY, BURN!!! SUBPRIME INFERNO! BURN BABY, BURN!!!
Performed by, "Eleua and the Hacks"
CNBC had the same spin as in 3/00. Today represented a buying opportunity and was not an indictment against the entire (speculative) economy.
The US$ tanked against the Yen. If this doesn't reverse, there will be margin calls galore in the carry trade.
There goes your liquidity...
So, B-52 Ben has to try to raise rates to save the dollar, but if he does that, the mortgage finance bird flu will spread like the 1918 Spanish Flu.
If he cuts, the dollar turns into dirt.
Better him than me.
Change the band's name to:
"Eleua and the Shorts"
I knew you guys were Real Estate pessimists, yet the negative sediment on the stock market surprised me. Honestly I would like to know where you all have your cash hoard piled up, as you don’t own Real Estate (RE = 0%), so you have a ton of cash somewhere...It would be good insight.
You dont have to mention dollar amounts, yet would like to know the percentage diversification across sectors and some specific stocks if you have them. Mr. Bubble, Eleua, & T.V.B are never for a loss of words. Please enlighten me with your trading strategies.
As for myself, I had a weird compulsion to buy on margin a ton of XMSR on 2/13 @$13.1999…then sold when the news of the merger popped @$15.5001 on 2/20. Needless to say even after today Im up 19% for the year (leverage multiplied my gains, was slightly negative for the year before). I chalk this up to luck and great timing, better to be lucky than good.
Well finance, I'll be your huckleberry...name that movie.
I have some stocks, a few of them are in companies that I anticipate being bought. I have shorted some as well....Luck of course. I recently purchased foriegn monies and being from Alaska, I have always had a good chunk in Gold, but that is just because I was raised by hermit doomsdayers who owned a couple of small time mines. I also have some money with a borker (intended spelling) who purchases not based on company fundamentals, but on peoples buying tendancy. He is giving me a 25% return over the lasts two years. don't know how we did today with that, so I am excited to see.
And you are correct, I do not currently have any in RE. Rode that pony in So Cal. Yippee Kayee
Oh, and liquid cash, waiting for the knife to hit the floor. NEVER try to catch a falling knife.
Yes, I love to hear myself blather on.
Cash (real cash, and enough to keep my other trades liquid and at the ready)
Metals (real metals)
Mining stocks
Tech shorts/puts
Finance shorts/puts
No RE. No bonds.
Real estate, us$, stocks, bonds, etc.... It's all one trade, and a bad one at that.
My positions are a vote of no confidence on the prevailing wisdom of the Lumpeninvestoriat. Yes, I am an angry, paranoid, trigger-happy freak.
There is almost 9 years of frustration in that last statement. I feel no sympathy for the crowd on the way down. The Great Unwashed laughed their asses off when my peers fought all their wars, and then were handed 40% paycuts and 20% unemployment. The masses thought it was cute when they bid up prices of a basic human need beyond the reach of the middle class. The sheeple blindly believe what Wall Street tells them to believe about tech and financial stocks.
Screw every last one of them! I hope they get kicked in the junk so hard their kids will curse them for trying to speculate their way to prosperity.
We have sold the seed corn. Unfortunately, you can only do that once.
Yes, I am really pissed off.
Asian Infection. Asian Stocks drop another 1% so far this morning(evening). Will be interesting as hell tomorrow
If China implodes its way all the way to social revolution and its industrial base crumbles, I'll be dancing naked on the roof.
This has the potential to be better than fantastic.
Yes, I know it is a longshot.
Oh boy...now "guru" wants to know how to invest:
"Mr. Bubble, Eleua, & T.V.B are never for a loss of words. Please enlighten me with your trading strategies."
I can't speak for the others, but I use the only sane strategy for the individual investor with limited time and funds -- long-term buy and hold. I could care less what the market does on a single; I really don't follow short-term fluctuations. That said, you misinterpreted my giddiness: I am giddy not because the market is taking a huge greasy dump, per se, but because the market is taking a huge greasy dump on the heads of particular types of people. Call me petty.
My asset allocation is diverse: I have a big chunk in (low-overhead!) index funds, and a small chunk in a select few tech stocks that I've had since before the dot-bomb crash (they weren't worth unloading at their post-crash prices, and they're steadily regaining value). I learned my lesson in that bubblicious debacle, which is why I'm here today to piss on your parade, "guru".
"even after today Im up 19% for the year (leverage multiplied my gains, was slightly negative for the year before). I chalk this up to luck and great timing, better to be lucky than good."
Uh, Yeah. Last year (1/1/2006-1/1/2007), the S&P gained nearly 14%. The Dow gained about 16%. You had a loss.
Maybe you should reconsider your screen name -- "luckier_than_good", perhaps?
I'm the first to say there is no shame in being lucky. Luck almost always trumps skill in my experience. It's not the book answer, but it works for me.
Unfortunately, it works both ways.
I backed up the truck on a few occasions. One such time was late August of '01. Nice....
Another was October of '02. Ouch!
Oh well, I'm with Mr. Bubble. It is the fact that Mr. Market is taking a huge, greasy dump on the 'New Economy' idiots that has me in a tantric frenzy. If I can make a few bucks on the trade, all the better...
I really don't know why I am giddy about this. Maybe because I've been in arguments with co-workers about it and not a single one has agreed with my predictions on either the market nor housing. so all I have left to go na na na na is housing to drop.
I try to tell myself to be careful what you wish for as there is ALWAYS consequences of which we don't anticipate. My job depends on companies spending money. and though there will always be a need for what I do, despite market conditions, when things get tight, I have to prove that I do it better than anyone else in order to keep my job. I do this by trying to see what is down the pipe and anticipate the tough times.
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